Living Networks – Chapter 3: The New Organization - Ross Dawson

42 Living Networks
Any organization will seek to minimize these costs. One obvious way is to
implement centralized purchasing. If every individual staff member who
required pencils, business cards, a chair, or any of the other paraphernalia
of day-to-day business went out to search for, compare, and negotiate with
suppliers, the total cost in time and effort would be immense. On the other
hand a centralized purchasing function is itself a cost, essentially being a
bureaucracy for organizing external transactions. Coase proposed that a
firm exists whenever the costs of maintaining that bureaucracy is lower
than the transaction costs. If transactions cost nothing, there is no need for
any bureaucracy, or arguably for any firm of more than one person.
Perhaps the single best way of understanding the impact of technology on
the economy today is that it has dramatically reduced transactions costs.
The Internet allows cheap and easy information search, and the ability to
compare prices, functions, and quality globally. The vast growth in
outsourcing over the last decade is due to the far greater ease and reduced
costs for firms to locate business functions outside the organization’s
boundaries.
Now that workflow—comprised primarily of the movement of messages
and documents—is becoming almost entirely digital, it is increasingly
irrelevant where work is performed. It matters little whether a colleague in
a business process is located in the same company and building, or working
in another company on the other side of the planet. Technology is making
the boundaries invisible.
Creating the new organization
Corporate Executive Board is a membership organization. Rather a curious
one. Over 1700 corporations pay an annual fee of $30,000 to be members
of the Washington D.C.-based firm. Their membership fee gives them
access to reports and conferences on specific industry issues and common
management challenges, such as employee retention and minimizing
regulatory costs. The first interesting feature is that almost all of the content
for the reports and briefings comes from the members themselves.
Corporate Executive Board specifically positions itself to draw out the
solutions that member firms have successfully developed for themselves,
and make them available to other members, frequently their competitors.
A second intriguing feature: this membership organization that is based on
firms sharing their strategic resources is a public company. In the 2001 fiscal
year it earned over $16 million on revenues of $103 million, and Business
Week placed it in fifth spot on its list of Hot Growth companies. At a time
when big-name consultants were smarting from clients tightening their
budgets, it was profiting from exactly the same trend. In addition, the vast
global membership network it has grown—including firms such as IBM,
General Electric, and Alcoa—means that it would be enormously difficult